South Sudan rejects African Union oil plan-FT

SINGAPORE Feb 1 (Reuters) - South Sudan's chief negotiator has rejected African Union-backed proposals that could see it pay up to $6.5 billion to Sudan in the latest attempt to break a deadlock between the two over oil export transit fees, the Financial Times reported on Wednesday.

The latest draft proposal from the AU foresees the South giving Sudan a direct cash transfer of between $2.6 billion and $5.4 billion, plus transit fees worth up to $1.1 billion, covering the period until the end of 2014, the report said.

The AU set these figures as parameters for discussion, with an exact figure to be decided on within 30 days, it added.

"The AU has lost sight of the principle of mutual economic viability," Pagan Amum, lead negotiator for the South, was quoted by the Financial TImes as saying.

"We could not sign; they were stealing the oil and obstructing the flow of our oil, and this robbery continues up to today. Now it is not secure for us to put our oil through Sudan because of this state piracy. This is about our economic independence. No country can continue through a country that is hostile."

South Sudan -- which seceded last July under a 2005 peace agreement that ended decades of civil war with Khartoum -- has shut down its roughly 350,000 barrels per day of oil production in protest after Khartoum started to seize some southern crude to compensate for what it called unpaid fees.

The landlocked new nation took control of about three quarters of the unified country's roughly 500,000 barrels a day in oil output, but it needs to export its crude through northern pipelines to the Red Sea port of Port Sudan.

Earlier, Amum reiterated South Sudan's proposal that the country pay a fee of $0.69 per barrel for one of the pipelines and $0.63 per barrel for another. Sudan has publicly stated it wants a fee of $36 per barrel.

Oil provides about 98 percent of South Sudan's income and is vital to the impoverished country as it tries to develop infrastructure and institutions devastated by a war that killed an estimated 2 million people. (Reporting by Himani Sarkar; Editing by Simon Webb)